I have been a CPA for over 30 years focusing on taxation. I have extensive experience with partnerships, real estate and high net worth individuals.
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Stupid Is As Stupid Does - Tax Protesters And The Cheek Defense

I recently wrote about the Browns whom Ron Paul likened to Mahatama Gandhi and Martin Luther King for their courageous stand against the income tax. I think they had more guns than Gandhi and MLK, but that is a detail. Mr. Brown kept saying “Show me the law”. That challenge gave me a bout of existential terror. It would be kind of embarrassing for me to realize that over my career I have told people to pay over millions of dollars in the aggregate that were not required. I satisfied myself on that point but then JJ MacNab pointed to a site that nicely outlines the source of the law that requires U.S. persons to pay income tax. It is titled “Here is The Law That Makes The Average American Liable For the Income Tax“ There is one concession to the protesters that the authors make:

Over the years and out of literally thousands of tax protesters who have been criminally prosecuted, a very small handful have won acquittals in their criminal trials, by convincing the jury that they were too stupid to understand that they had to pay taxes.

People who win on what is known as the “Cheek defense” can still have their property seized and the like. They just don’t get an all expense paid vacation at Club Fed. The Cheek defense is a little challenging though. You have to have some intelligence to convince people you are stupid, but you cannot have too much.

Recently Joseph Maga was complaining to the Sixth Circuit that the lower court erred in letting the federal prosecutor convince a jury that he was smarter than he thought he was. The Sixth Circuit complimented him on his intelligence by upholding his conviction. Here is the story:

Several years ago, Maga obtained copies of his “individual master file” transcript (also known as an “IMF transcript” or a “specific transcript”), a technical record that the IRS uses to keep a running account of all of a person’s tax events—e.g., penalties assessed, refunds owed, refunds issued, and interest. He noticed that the code “MFR-01” appeared on each of his IMF transcripts. Unsure of the meaning of this code, he wrote to the IRS about it. An IRS disclosure officer replied via letter that the code meant “1040 not required.” Based on this letter and his reading of IRS manuals on the Internet, Maga claims he interpreted the code to mean that he was “not required” to file any returns.

The IRS’s records revealed that Maga stopped filing tax returns in 1996, years before he received the letter from the disclosure officer. When the IRS sent a levy notice, Maga requested a collection due-process hearing, purporting that he did not need to file tax returns. A grand jury indicted Maga for failure to file a federal income tax returns between 2002 and 2006—five counts in all. It also indicted Maga for four counts of tax evasion.

That cross-examination revealed that Maga, in his request for a collection due-process hearing, claimed that he did not need to file a return and, by way of explanation, attached the letter from the IRS disclosure officer explaining the meaning of MFR-01. Keegan read this letter to the jury, which concluded with the statement, “[i]n addition, [this letter] is not an official determination by the internal revenue service as to whether or not tax payers are required to file a return.”

The jury did not buy into Mr. Maga’s sincerity and the Court ruled they were being reasonable.

When viewed in a light most favorable to the government, the record permits a factfinder to conclude, beyond a reasonable doubt, that Maga actually knew about his legal duty to file and only pretended to rely on an idiosyncratic reading of the IRS letter and documents

Furthermore, a reasonable jury could decide that an individual wily and meticulous enough to cull the finer points of the IRS’s tax practices in search of a loophole—sending a Freedom of Information Act request, demanding explanations of the internal code, poring over manuals—could not have been so inattentive as to actually misunderstand the IRS letter’s meaning. The IRS letter and documents explain that the MFR-01 code, generally speaking, serves two different functions: indicating the type of forms the taxpayer must file and the type of forms the IRS must send. The letter does not state which of the two functions the code served in Maga’s case (or whether the code indeed served both functions at the same time). And a reasonable jury could disbelieve that the same individual who carefully dissected the IRS letter’s meaning with regard to MFR-01 actually failed to notice the express warning, just two or three sentences later, that an individual’s code may change with time and that “[the letter] is not an official determination by the internal revenue service as to whether or not tax payers are required to file a return.”

Maga exerted every effort to verify that MFR-01 meant “1040 not required,” yet made no effort to double-check his convenient inference of complete tax exemption. Given Maga’s attitudes toward taxes, his familiarity with the IRS letter and manual, the “plainly incredible” nature of his interpretation, and the absence of any attempt to verify the accuracy of his risky interpretation, a factfinder could conclude beyond a reasonable doubt that Maga willfully disregarded his known duty to file returns.

The “secret computer code” argument has actually been kicking around for quite a while. I heard about it in the mid-nineties from a former friend who I was hoping to rescue from that nuttiness. Here is something on it from someone named Frederick Mann, who appears to be still active in the field:

Further, I have filed with the IRS a Freedom of Information Act request for all files they have on me. I am aware that there are certain codes in their files which indicate whether or not one is liable for the graduated income tax. (Hint: Code MFR-01 means you are not required to make or file a return). If the IRS ever decides to take me to court, those codes would be powerful legal ammunition.

Well Mr. Mann’s powerful legal ammunition turned out to be a blank for Joseph Maga. The problem with the “secret computer code” defense is that if you are smart enough to execute it, you are not stupid enough for the Cheek defense to work.

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Sorry for the unclarity. That was the Tax Court citing Brushaber not me. The quote is from Woods v Com. It was specifically addressing your contention that the 16th amendment was not properly ratified. You can get sanctioned for making that argument in Tax Court and if that is what you are arguing in a criminal proceeding you cannot use the Cheek defense.

Mr Anonymous, I have checked out some of the information you have presented. This is the first I have read of Mr. Barringer. It is, however, another case of lower courts not allowing prior cases into court as evidence. Many lower level judges have taken authority to dismiss supreme court rulings from evidence. Im sure you will agree that is quite suspect and odd. Most people who file this hearings give up because not all can go the financial distance as Mr. Barringer has seemed to have gone thus far. A very telling case is that of The Government vs Whitey Harrell. Mr. Harrell won his first case because the Law was not properly displayed in court to convict him. The Law was requested by the Jury numerous times. The Law could not be given to them by the judge or the prosecution. Harrell won his first case. The Government brought Harrell back to court a 2nd time. This time the judge disallowed almost every relevant piece of information pertaining to the reasoning of not being guilty because the law is not percise and existant. Mr Harrell was convincted and given probation, fines, and past fees due. The question here is, has anyone yet to prove there is a law that unapportioned direct tax can be layed on wages and salaries? There have been cases where this valid question is dismissed by judges as “frivolous” when it is indeed legitimate. The protestors who have won their cases have had juries rule in their favor when this information was permitted in the courtroom. 100% success rate. So Mr Anomoyous, I ask you not have people failed in their pursuit of protesting the Federal Income Tax of their wages in the past. Nor do I argue or care to present all the cases such as Whitey Harrell’s to you just to argue back and forth. I, foremost, ask you, where is the law that insists and requires US Citizens to pay an income tax on wages and salaries? Mr Reilly is still trying his best. I welcome your attempts as well. It is a legitimate question. And if it is not easily answered, why would anyone argue the counter point? As far as Im concerned, this should be proven without a doubt to be true. And it is hardly that.

Now, Lazzaro, can you provide something of yours for me to further review your background?

As to your question you claim is “legitimate”, I don’t think so!

I enjoy the banter for those who wish to indulge your in your exercise, but I consider your question an invitation for an argument, not a request for information.

As I said before, if you think you can win a properly framed case and have the income tax on wages and salaries declared “unconstitional” or have it be determined that no law exists taxing such things, show me the case or give me a presently pending case to follow.

Otherwise, can I put you down as declining the invitation to take up Dr. Dino’s cause?

In reply to this post … “I think many of us, apparently naively and mistakenly, believe that wages and salaries are compensation for our services. I’m having a quick lunch so I don’t have time to check the case law on this issue until tonight. This could be huge though. On the other hand you have the first sentence that says “all income from whatever source derived including, but not limted to, so I don’t think we will be “dropping pencils” as the saying goes and switching to refund claims” That is indeed the most important point to be made. When you mention .” On the other hand you have the first sentence that says “all income from whatever source derived including, but not limted to..” you again rely on “income” as a synonym for “wages”. Income, in this sentence, still refers to all personal gains and profits, which includes the listed, but not limited to… it still does not apply to Wages. Wages are a transfer of assets. Trade off simply put. “Income” is realized gain. There is no realized gain when a laborer trades his work for compensation. Noone gains in that agreement. That is a trade of assets. Service for Monetary compensation. If the laborer worked for free, then the employer gains. If the employer is forced to pay the employee for doing nothing, then the employee gains. Noone gains profits when the mutual agreement is to trade assets.

Mr Anonymous… You are an example of the type of person that attempts to win an arguement by manipulating what I said. The 16 amendment, if you examine carefully, the 16th amendment was not truely ratified by the number of states that the vote claimed ratified it. The results were rushed and not accurate, yet the amendment was passed. As it stands, its Law. My point of this is if it were to be investigated and proposed to have it appealed, it could very easily be done because of its inapropiate passing and unconstituional ratification. I never said this would be the arguement to win a case against the IRS.

MY ARGUEMENT for winning a case agains the IRS is that the 16th Amendment was implented to legally tax unaportioned direct taxs on personal gains and profits. This is essentially the definition of income. Income however, is not to be confused with WAGES. Wages is the exchange of assest, most commonly labor for monetary compensation. This is a gain for neither party, for it is a trade of assets, not personal gain over the other. It is a mutual contract. If you seek the definition of INCOME that the Federal Income Tax is permittable by law to tax, it does not include wages. This is how a majority of people have won their cases. It has not been easy to do. Going to court is no charity event. It is expensive, extensive, and the IRS relies on this to bury people in the lower levels of court proceedings. Those who can withstand that and make it to the higher courts, and ignore the threat of imprisonment via lower court rulings that are usually handed down as a result of judges not allowing fact of law to be used as example in court, is the battle citizens face. There is no law my friend. I would be happy to further investigate this case you presented further. In the meatime, I challenge you to investigate the law that legally implies the IRS to tax wages and salary. Its a very simple challenge. Way simpler then the reading I will have to do to see excactly where Dr Dinos case stands.

Your argument would be so much more convincing if you didn’t use apostrophes in words that are plural, not possessive. Whether this is ignorance or merely inatttention to detail, it does not fill me with great confidence in your abilities as a researcher. But by all means, carry on. You are nearly as entertaining as a street corner prophet.